Research Journal of Finance and Accounting
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol 3, No 5, 2012
Challenges of Auditors and Audit Reporting in a Corrupt
Prince Kennedy Modugu* Nosa Ohonba and Professor Famous Izedonmi Department of Accounting, Faculty of Management Sciences, University of Benin, PMB 1154, Benin City, Nigeria
Email of corresponding author: email@example.com
The rising spate of corruption in both private and public establishments has assumed an enormous dimension. This development has eroded public trust in financial statements. Auditors in their duty to expressing professional opinion on the truth and fairness of financials are ostensibly bedeviled with quantum of challenges which could result in the issuance of a clean bill of health to corruption-riddled establishments. It is against this background that this paper critically examines the challenges corruption poses to auditors and audit reporting, and proffers formidable cures to ameliorate the achilles heels and to redeem the auditing profession from impeding collapse.
Keywords: auditors, corruption, audit reporting
Historically, auditing was confined principally to public accounts. This is a clear indication that from an early date, it was customary for an audit of the accounts of manors and estates to be performed. The person whose duty it was to make such an examination of accounts became known as the auditor, the word being derived from the Latin ‘audire’, meaning “to hear”. Originally, the accounting parties were required to appear before the auditor who had their accounts. The audit of business accounts did not become common until the nineteenth century. The enormous increase in trade in that period, which was fostered by the discovery of steam power and by mechanical inventions, generally led to the formation of numerous joint stock companies, and other corporate undertakings, involving the use of large sums of capital under the management of a few individuals (Akpomi & Amesi, 2009). Under these conditions, the advantages to be obtained from utilizing the services of auditors became apparent to the public generally, and a great increase in the practice of auditing resulted; as the present day forms the most important part of a professional accountant’s practice (Walter, 1969). With complexities in both public and private sectors, the duties of auditors became heightened. These complexities were met with corruption, a major feature of developing economies thereby threatening the independence, integrity and objectivity of the auditors. As a result of the increase in the level of business activities, both in the public and private sectors, it is now required by statute that activities of governmental and corporate business organizations be audited. The implication of this requirement is to ensure that those entrusted with funds are held accountable. Auditing therefore ensures that accounts and records of organization show a true and fair view. Auditors do this by thorough examination of the books of accounts of businesses and to confirm whether there is appropriate approval and authorization for every transaction. If auditors are not competent especially in bringing their skills to bear in a corrupt environment, then the whole audit process is of no value. In Nigeria, as well as the developed countries, Chartered Accountants in practice (Auditors) are seen as competent but a number of recent events including corruption and failures of some banks and some companies have given rise to doubts in the minds of the business community (private and public sectors). An interesting idea put forward by Abadi (2005), is that competence is constantly being improved but at the same time economics has dictated that the time spent on auditing is constantly being reduced even though modern laws, in accounting systems and structure are steadily becoming more complex. It is against...
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